Tax on non-ISA savings interest

chinadog1

Hi,
In January 2025 I got a tax bill for interest accrued on non-ISA savings for the 2023-2024 year. I agreed with the amount (£3668, of which £2668 was taxed at the 20% rate). My tax code was adjusted accordingly.
A few weeks later in February 2025 I got another tax bill for a similar amount (approx £3100 interest) and my tax code was further reduced to collect the extra tax. This time no explanation was given for this extra bill and I didn't query it at the time. 
Is it reasonable to assume that HMRC have made an estimate on my savings interest for the 2024-2025 year based on the previous year's figures? 

Cheers

Isthisforreal99

chinadog1 said:

Hi,
In January 2025 I got a tax bill for interest accrued on non-ISA savings for the 2023-2024 year. I agreed with the amount (£3668, of which £2668 was taxed at the 20% rate). My tax code was adjusted accordingly.
A few weeks later in February 2025 I got another tax bill for a similar amount (approx £3100 interest) and my tax code was further reduced to collect the extra tax. This time no explanation was given for this extra bill and I didn't query it at the time. 
Is it reasonable to assume that HMRC have made an estimate on my savings interest for the 2024-2025 year based on the previous year's figures? 

Cheers

Depends what you got in February 2025, you say another bill but for what year? Was it actually a tax calculation?

Normally HMRC would use the exact same figure for your 24/25 tax code as used for 23/24.

HMRC seem a little late this year in producing actual 24/25 calculations which should show the actual interest reported to them

chinadog1

The second bill from February didn't mention a year, just the extra amount that I owed without a calculation. 
At the time I did a little internet searching and found this
"HMRC will estimate how much interest you'll get in the current year by looking at how much you got the previous year". 
I assumed this is what they've done for the 24/25 year as they are always behind which is annoying.

eskbanker

chinadog1 said:

The second bill from February didn't mention a year, just the extra amount that I owed without a calculation. 
At the time I did a little internet searching and found this
"HMRC will estimate how much interest you'll get in the current year by looking at how much you got the previous year". 
I assumed this is what they've done for the 24/25 year as they are always behind which is annoying.

You should be able to see the calculation of the 2024/25 coding within your online personal tax account if you didn't receive any coding notices at the time?

Isthisforreal99

chinadog1 said:

The second bill from February didn't mention a year, just the extra amount that I owed without a calculation. 
At the time I did a little internet searching and found this
"HMRC will estimate how much interest you'll get in the current year by looking at how much you got the previous year". 
I assumed this is what they've done for the 24/25 year as they are always behind which is annoying.

So what did the 'bill' look like, is it a potential underpayment shown in a tax code adjustment?

It's not a case of being behind, it'a that they don't receive the information until 2 or 3 months after the end if the tax year.

chinadog1

I don't have an online account with the HMRC, I'm on PAYE so have never needed one in the past. I'll check the exact wording on the letters when I get home from work and report back.

chinadog1

The wording on the letters says untaxed interest @ £3168 which is correct for 23/24 and "less adjustment for tax you owe earlier year" (£3173). It doesn't say what year though. I understand the calculation for the first amount but there isn't a calculation for the second amount, just a new tax code 622L, which is a combination of the two figures above.
It does say on note 3 on the reverse of the letter that I owe £1269 tax in total and this will be collected in equal installments.
Should I create an online tax account to sort this out?

Dazed_and_C0nfused

chinadog1 said:

The wording on the letters says untaxed interest @ £3168 which is correct for 23/24 and "less adjustment for tax you owe earlier year" (£3173). It doesn't say what year though. I understand the calculation for the first amount but there isn't a calculation for the second amount, just a new tax code 622L, which is a combination of the two figures above.
It does say on note 3 on the reverse of the letter that I owe £1269 tax in total and this will be collected in equal installments.
Should I create an online tax account to sort this out?

It sounds like a new tax code for 2025/26, it surely must say somewhere which tax year the tax code is for 🤔

£3,168 will be an estimate of the interest HMRC expect you to receive for 2025/26 (£3,668 less £500 which is due to be taxed at 0%).

The £3,173 is unlikely to be tax you owe for an earlier tax year, it's the deduction needed to collect tax owed from an earlier tax year.  There is normally a note on the tax code with the amount the £3,173 is trying to collect.

molerat

chinadog1 said:

I don't have an online account with the HMRC, I'm on PAYE so have never needed one in the past. I'll check the exact wording on the letters when I get home from work and report back.

Being PAYE has no bearing on needing an on line tax account.  It contains (PAYE) tax information with the ability to change incorrect assumptions held by HMRC, your state pension forecast and NI information. It is not something just for those who self assess, it is useful tool for all.

eskbanker

Dazed_and_C0nfused said:

chinadog1 said:

The wording on the letters says untaxed interest @ £3168 which is correct for 23/24 and "less adjustment for tax you owe earlier year" (£3173). It doesn't say what year though. I understand the calculation for the first amount but there isn't a calculation for the second amount, just a new tax code 622L, which is a combination of the two figures above.
It does say on note 3 on the reverse of the letter that I owe £1269 tax in total and this will be collected in equal installments.
Should I create an online tax account to sort this out?

It sounds like a new tax code for 2025/26, it surely must say somewhere which tax year the tax code is for 🤔

£3,168 will be an estimate of the interest HMRC expect you to receive for 2025/26 (£3,668 less £500 which is due to be taxed at 0%).

The £3,173 is unlikely to be tax you owe for an earlier tax year, it's the deduction needed to collect tax owed from an earlier tax year.  There is normally a note on the tax code with the amount the £3,173 is trying to collect.

See bolded wording in the post you were replying to, i.e. 40% of £3,173 is £1,269....

chinadog1

Thanks to all who have made this easier to understand, this makes a little more sense now. I got the original demand for £3168 interest from year 23/24, for which my PA was reduced to 940L. I agree with that. Next they wrote to say that I had untaxed interest from a "previous year" at £3173, but they haven't indicated what year. I assume that is an estimate for 24/25, as that letter was received before the end of that tax year, Feb 25. Hence my tax code for 25/26 is 622L, which is £3173 + £3168 = £6341. Deduct this from £12570 PA equals £6229. I can only assume from all this that they are collecting unpayed tax from the years 23/24 and 24/25, and won't have any info yet for 25/26?
The bill for 25/26 should be less as I've moved savings money into ISAs.